Japan’s NTA clarifies tax treatment for foreign SSA adoption, reaffirming the use of existing transfer pricing rules.
Japan’s National Tax Agency (NTA) issued FAQs addressing the Simplified and Streamlined Approach (SSA) on 30 June 2025, also known as Pillar One Amount B, developed by the OECD/G20 BEPS Inclusive Framework.
The SSA applies the arm’s length principle in a simplified manner to in-country baseline marketing and distribution activities.
Japan has decided not to implement the SSA at this time. The FAQs clarify Japan’s tax treatment where foreign jurisdictions of Japanese multinational enterprise (MNE) groups have adopted the SSA.
Key points include:
- Japanese taxpayers must continue applying existing transfer pricing methods to determine arm’s length prices, regardless of whether the foreign related party’s jurisdiction uses the SSA or is covered.
- Unilateral Advance Pricing Agreements (APAs) in Japan must be based on existing arm’s length pricing methods, not the SSA.
- Mutual Agreement Procedures (MAP) discussions will also rely on existing arm’s length pricing methods. However, Japan will respect SSA outcomes applied in covered jurisdictions to the extent permitted by domestic law and practice.
- Transfer pricing documentation prepared under the SSA abroad will not automatically meet Japan’s documentation requirements unless it also includes analysis using existing methods consistent with SSA results.
